8.5 mn sft office space supply expected in Mumbai through 2016

A total of 16 mn sft is expected to become available in the city through 2017

Ashutosh Limaye, National Director – Research, JLL India

India 26 September 2016:
Mumbai figures in top three cities globally that will add the maximum
supply of Grade-A office space through 2017, according to a recent
finding by JLL. Shanghai tops the list among major global markets and is
followed by Mexico City, Mumbai, Beijing, Singapore, Sao Paulo, Tokyo,
Moscow, San Francisco and London in the top 10, as of 1H2016.

The
current office stock of the city stands at 106 million square feet and
it will add 8% of this stock through 2016 or almost 8.5 mn sft. From 3Q
2016 through 4Q 2017, the financial capital of India will expand its
Grade-A office footprint by around 15% or almost 16 mn sft.

These
figures do not factor in construction delays. However, given the track
record of developers as far as sticking to construction deadlines is
concerned, the supply could be around 13 million sq ft, which is
significant nonetheless.

In the survey that covers all
office sub-markets in each city, it’s the markets from emerging
economies that dominate the top-10 list. Shanghai comes on top with 42%
of its current stock to be added in the next 18 months, followed by
Mexico City (at 22.5%).

Beijing (at 14%), Sao Paulo (at 10%)
and Moscow (at 7%) are three other cities from emerging economies among
the top-10. Among the mature economies, Singapore City will add 11%,
Tokyo will add 9%, San Francisco will add 6% and London will add 5% of
their current office stock.

Market Dynamics

What
needs to be noted here is that much of this projected office supply
consists of buildings launched many years ago and Mumbai has seen only a
few launches in the last few years. While the peripheral areas will see
an oversupply, the supply at right locations will be very less.

The
Grade-A supply to come up in 2018-19 in the city’s de-facto central
business district (CBD) of core Bandra Kurla Complex (BKC) and SBD
Central will be just 1.6 million sft in an ideal scenario, i.e. when
delays do not occur in construction work, out of a total expected supply
of 11 mn sft.

Most of the rest will come up in the peripheral
areas. This will have implications after 2019, with supply drying up in
the right locations. Also, rentals in the central locations will go up
even as rentals in peripheral areas will remain stagnant. Developers
can, therefore, consider constructing new buildings to meet the future
demand in the good locations.